ITEP – Page 166 – Informing tax policy debate nationwide

brief September 1, 2011
State Income Taxes and Older Adults

State governments provide a wide array of tax breaks for their elderly residents. Almost every state levying an income tax now sensibly allows some form of income tax exemption or credit for its over-65 citizens that is unavailable to non-elderly taxpayers. But many states have enacted poorly-targeted, unnecessarily expensive elderly income tax breaks that make state tax systems less sustainable and less fair. This policy brief surveys approaches to elderly income tax relief and suggests options for reforming state tax breaks for seniors.
brief September 1, 2011
State Treatment of Itemized Deductions

In 2011, thirty one states and the District of Columbia allow a group of income tax breaks known as “itemized deductions.” Itemized deductions are designed to help defray a wide variety of personal expenditures that affect a taxpayer’s ability to pay taxes, including charitable contributions, extraordinary medical expenses, mortgage interest payments and state and local taxes. But, these deductions cost states billions of dollars a year while providing little or no benefit to the middle- and low-income families hit hardest by the current economic downturn. This policy brief explains itemized deductions and explores options for reforming these upside down tax breaks at the state level.
brief September 1, 2011
Property Tax Circuit Breakers

State lawmakers seeking to enact residential property tax relief have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low-income and middle-income taxpayers. One increasingly popular type of targeted property tax relief program is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to property tax relief.
brief September 1, 2011
The Folly of State Capital Gains Tax Cuts

For over twenty years now, the federal tax system has treated income from capital gains more favorably than income from work. A significant number of state tax systems do as well, offering tax breaks for profits realized from local investments and, in some instances, from investments around the world. As states struggle to cope with short- and long-term budget deficits and to devise strategies to promote economic development in a sustainable fashion, policymakers should assess whether preserving such tax preferences is in the public interest. This policy brief explains state capital gain taxation and examines the flaws in state capital gain tax cuts.
brief September 1, 2011
Split Roll Property Taxes

In the past half century, state lawmakers have explored a wide variety of approaches to scaling back property taxes. One such approach is the split roll property tax, also known as a classified property tax. Unlike a regular property tax system which taxes all types of real property at the same rate, a split roll property tax applies different tax rates to different types of property. This policy brief looks at the advantages and disadvantages of the split roll approach.
brief September 1, 2011
Reducing the Cost of Child Care Through Income Tax Credits

Low- and middle-income working parents frequently spend a significant portion of their income on child care. As an increasing number of single parents take jobs, and as the number of two-earner families continues to rise, child care expenses are an unavoidable and increasingly unaffordable expense for these families. This policy brief looks at one way of making child care more affordable: the dependent care tax credit offered by the federal government and many states.
brief September 1, 2011
Property Tax Homestead Exemptions

State lawmakers seeking to enact residential property tax relief have two broad options: across-the-board tax cuts for taxpayers at all income levels, and targeted tax breaks. More than 40 states have chosen to achieve across-the-board tax relief by providing a “homestead exemption.” This policy brief explains the workings of the homestead exemption and evaluates its strengths and weaknesses as a property tax relief strategy.
brief September 1, 2011
Capping Property Taxes: A Primer

In response to what anti-tax advocates have branded as “out of control” property taxes, a number of states have decided to make use of tax “caps” to restrict the growth of local property taxes. California’s Proposition 13 tax cap, approved in 1978, inspired numerous other states to enact similarly ill-conceived property tax caps. These caps can come in many forms, but all are poorly-targeted and costly. In most cases, these caps amount to a state-mandated restriction on the ability of local governments to raise revenue. While state lawmakers get to take credit for cutting taxes, local lawmakers are the ones forced to make difficult decisions regarding which services to cut. There are three main types of property tax caps in use around the country: caps on property tax rates, caps on assessed value growth, and caps on overall property tax revenue growth.
brief September 1, 2011
Taxes and Economic Development 101

One of the main economic goals of most state policymakers is, quite sensibly, to attract businesses to their state. But, all too often, these policymakers have been encouraged to think that tax cuts make the best bait. A growing body of literature reminds us that taxes themselves create public infrastructure that spurs investment and improves the quality of life for businesses and workers alike. Communities that illustrate a strong commitment to public institutions like good schools, well-built transportation systems, and quality police and fire protection will ultimately have an advantage in attracting new business investment. This policy brief looks at the complicated role taxes play in economic development and discusses why low-tax strategies are not effective.
brief September 1, 2011
Fighting Back: Accountable Economic Development Strategies

Even though there is little evidence that cutting taxes and reducing public investments actually spurs economic development, lawmakers across the country have been persuaded to give tax breaks to companies in hopes of encouraging a thriving economic climate in their state. Some lawmakers are wising up to the idea that subsidies don’t work. But for policymakers who insist on offering incentives, there are some important, simple, and concrete steps that can be taken to ensure that subsidies aren’t allowed to go unchecked. This policy brief offers guidance on best practices for alternatives to providing blanket tax breaks.